Money Advice

North Korea worries start to seep into Wall Street

Posted by The Simply Money Team on Apr 17, 2017 2:38:50 PM

Fear is on the rise as Wall Street considers what might happen if the U.S. decides to take military action against North Korea. Any conflict would probably result in a drop in stock prices; however, that move would likely be short lived.

Why? Over the long history of the stock market, there have been many causes for concern, but ultimately, the growing economy pushes prices higher. Two recent stock market fears were the election of President Trump and the United Kingdom's decision to leave the European Union (AKA, “Brexit”). The stock market suffered a very large decline overnight when Trump won, but closed higher the next day. Likewise, it took stocks just two weeks to recover from the UK's decision. Looking back a little further shows similar results. For example, the market recovered in just five days from the Cuban missile crisis in 1962. It took just 19 days to recover after the September 11th attacks. It would not be surprising to see some more short-term weakness in the stock market until there is some clarity regarding North Korea.

With that said, there are a number of things working in the stock market's favor right now. First and foremost, there is the very low recession risk, indicating that a drop in stocks could be a buying opportunity for you. Second, the rise in investor fear is actually a good thing because it means the “nervous” money is getting out. This then becomes money that’s sitting on the sidelines, ready to go back into the stock market, creating possible future buying demand. Third, when stocks of big companies have a strong first quarter, the rest of the year tends to be very good with positive results approximately 88% of the time. And currently, for all of 2017, Simply Money Advisors expect earnings for companies in the S&P 500 (the 500 largest companies in the U.S.) to grow around 18%. This would be the best year for earnings growth since 2010.

The Simply Money Point

At Simply Money Advisors, we believe stocks will head higher this year, and the growth will be driven by the economy and earnings. If there are short-term fluctuations, either due to North Korea or any other global or domestic event or threat, it’s important to always stay true to your financial plan. You shouldn’t be making your investment decisions based on headlines.

Topics: Investing, Economy


Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Simply Money Advisors), or any non-investment related content, made reference to directly or indirectly will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, this content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained here serves as the receipt of, or as a substitute for, personalized investment advice from Simply Money Advisors. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Simply Money Advisors is neither a law firm, a certified public accounting firm, nor a tax advisory firm and no portion of the blog content should be construed as legal, accounting, or tax advice. Please consult your own attorney, accountant, and tax advisor for legal, accounting, and tax advice. A copy of the Simply Money Advisors’ current written disclosure statement discussing our advisory services and fees is available for review upon request. Advisory services offered through Simply Money Advisors, a SEC registered investment adviser. Insurance services are offered through Simply Money Insurance Agency, a separate entity from Simply Money Advisors. Simply Money™ and the spiral symbol are trademarks of Simply Money IP Holdings, LLC.

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